COMMISSIONER OF INCOME TAX Vs. RAM RATAN

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following questions for the opinion of this court :

(2.) THE first question arises out of the Tribunal's order in Income-tax Appeal No. 748 of 1978 and cross-objection No. 31 of 1977-78. This was an appeal by the Revenue and the cross-objection was filed by the assessee, Ram Ratan. Questions Nos. 2 and 3 arise out of the Tribunal's order in Departmental Appeals Nos. 749, 750 and 751 in the cases of Jitendra Kumar, Anil Kumar and Pradeep Kumar who were the minor sons of the aforesaid Ram Ratan. THE aforesaid appeals and the cross-objection related to the assessment year 1976-77 and were disposed of by the Income-tax Appellate Tribunal by a common order.

(3.) THE firm as aforesaid was constituted with effect from January 1, 1967. THE minors invested certain amounts in the firm at the time of the constitution of the firm. THEy also invested certain amounts later. All such amounts were credited to the accounts of the minors with the said firm. Interest allowed on the investments and the profits accrued to the minors in terms of the partnership agreement were also credited to those accounts. In the assessment of their father, Shri Ram Ratan, for the year 1976-77, the Income-tax Officer included the amounts of interest allowed to the minors on the said balances in terms of Section 64(1)(iii) of the Income-tax Act. THE said amounts were also included in the income of the respective minors on protective basis as it was contended in the case of their father that such amounts are not of the nature of benefit arising to the minors from their admission to the benefits of the aforesaid partnership firm. THE assessee, Ram Ratan, appealed to the Appellate Assistant Commissioner who took the view that only interest relating to the initial deposit made by the minors was includible in the income of their father under Section 64(1)(iii) and that the interest relating to the rest of the amounts could not be treated as income arising directly or indirectly to the minors from their admission to the benefits of a partnership-firm. THE Revenue appealed to the Income-tax Appellate Tribunal which upheld the view taken by the Appellate Assistant Commissioner and dismissed all the aforesaid Departmental appeals.